Sunday, March 13, 2005

Cheri Pierson Yecke is deeply dishonest

Or not very smart. I suspect dishonest. Here's her take on Social Security from the Star Tribune:

A Feb. 13 Star Tribune editorial disagreed with President Bush's assertion that Social Security is not a "trust fund." The president was quoted: "Some in our country think that Social Security is a trust fund -- in other words, there's a pile of money being accumulated. That is simply not true. ... There is no trust."

The Star Tribune editorial writers responded with: "There's no easy way to say this: The president is wrong or is deliberately trying to mislead the American people. His careless use of language ... feeds popular misconceptions that the trust fund is a myth."

Who is right?

To answer this, one has to know what a "trust" is. In investment terms, a trust is "a legal arrangement whereby control over property is transferred to a person or organization (the trustee) for the benefit of someone else (the beneficiary)." In other words, a trust is established when an individual allows someone else to control their property for them. Trusts are made up of specific items of property -- for example, money, land or items of value -- that can be passed on to one's heirs.

When we pay our taxes into Social Security, is there a separate account that holds our money in our name and that can be willed to our beneficiaries? No. The president is correct -- Social Security is not a trust fund.

Is Social Security a trust fund? Of course not. Is that what Bush said or what the Strib editors criticized him for? Of course not.

I'm beginning to think that the Strib editors publish these Op/Eds for their own grim amusement.

Social Security has a trust fund. The trust fund is growing, and will continue to grow for 14 years -- or more. Inside the trust fund are treasury bills, the safest investment in the world. At least until Bush assumed office.

Bush was using a Great Republican Dodge. He said there was no trust fund to mislead Americans. Bush's logic goes like this: treasury bills are worthless when the federal government owns them, because they have to be repaid. If I buy a government bond, it has value. If the Social Security Trustees buy the same government bond, it's worthless. This is difficult to understand, because it's nonsense.

It's time for Bush and Flacks to put up or shut up. If treasury notes have no value, dismiss the Social Security trustees until they start investing in something that does have value. I hear the outlook for credit card companies looks good.

Almost forgot the other big lie from Yecke's Op/Ed: that a trust fund isn't a trust fund unless the beneficiary has a right to direct the corpus of the trust after his or her death. Hammer was once a lawyer and created a number of trusts for the benefit of a surviving spouse, but where the surviving spouse did not have a general power of appointment. Either Hammer better check his malpractice tail coverage, or Yecke is lying.